The captive arms of many CV
manufacturers have been hit hard by truck insolvencies –
not least by the collapse of Innovate Logistics.
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Commercial vehicle leasing companies
are being hit hard by the growing number of insolvencies among
transport, construction and wholesale and retail trade businesses –
in short, those firms that most use trucks, trailers and vans for
their oper-ations.
In England and Wales alone, during the first
quarter of 2009, there were 155 voluntary liquidations in the
transport industry, compared to 101 in the same period last year.
Liquidations almost doubled in the construction sector, from 346 to
649, and grew from 381 to 611 in the wholesale and retail
trades.
Bad news for commercial
vehicles
This tough environment has meant
that the number of delinquencies and repossessions has increased,
and few leasing companies have escaped being hit hard by this
crisis. One sector particularly badly hit has been the commercial
vehicle captive finance companies.
The UK arm of Volvo Financial Services is
believed to have been particularly badly effected by writedowns
caused by customer insolvencies.
As a result, Volvo FS has been forced to
recollect and resell its vehicles, although the downturn has meant
that it cannot realise the residual values it anticipated – in some
cases it has lost between £6,000 (€7,059) and £10,000 per truck,
sources said.
Following the collapse of one company alone,
Nottinghamshire-based transport group Innovate Logistics, 180 Volvo
FH trucks had to be remarketed around the country, it is
understood.
Volvo’s remarketing business is being hit
primarily because “with new sales down, dealers are trying to make
some profit from selling used trucks, but will only pay a certain
sum, so somebody has to have a loss and it tends to be the finance
company”, a transport finance source said.
Captives are generally more at a disadvantage
than their banking rivals because their cost of borrowing is around
200 basis points higher – which forces them to drive up their
prices.
Hitachi Capital, meanwhile, has identified
broker-introduced business as vulnerable, and decided to exit it at
the end of last year.
The company saw insolvencies among its clients
over the past nine months grow by around 30 percent.
According to Jon Lawes, divisional MD for
Hitachi Capital CV Services, many of these bad deals were provided
to it by brokers.
“We exited the broker market because the risk
of failure is a lot higher than going directly to the customer,
where you can form a relationship and understand their business
model,” Lawes said.
The company now favours direct relationships,
particularly with big customers, including the likes of National
Grid, Centrica and Network Rail.
However, having this direct relationship means
carrying out due diligence with small clients can be expensive.
It relies heavily on score
cards.
As with Hitachi Capital, MAN Financial
Services in the UK, which saw an increase of 10 percent in customer
insolvencies, has been particularly badly hit by the demise of some
of its smaller customers.
However, it has seen bigger client
insolvencies – the largest one was a firm with a total fleet of 150
vehicles, though not all supplied by MAN FS.
The captive has agreed with a couple of large
rental companies leasing its trucks to reschedule the terms of
their contracts, agreeing half payments for a short period of
time.
“A moratorium is not the way forward because
the customer still has the responsibility of paying, otherwise you
are only rolling your debt forward, and if something happens in the
interim, you’ve got a bigger debt,” Elliot Lennick, CEO of MAN FS
in the UK, said.
He continued: “Some money is better than none,
and we don’t want assets coming back at this time, so it is better
to keep the customer solvent.”
